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White House seeks to regulate online drug sites

CBS.MarketWatch.com

WASHINGTON (CBS.MW) -- In one of the most significant regulatory initiatives to date aimed at the Internet, President Clinton called Tuesday for stricter regulation of online drug stores, vowing a crackdown on "rogue operators" that dispense medications without prescriptions.

Experts said the move may be the first in establishing a framework for more comprehensive regulation of the growing online health care arena. But some view the move as regulatory overkill that threatens to stifle the free flow of health-related information to patients.

Clinton called for new laws that would give the Food and Drug Administration authority to monitor and certify companies that dispense drugs online. As part its fiscal 2001 budget request, the White House will also call for $10 million to be allocated to the FDA to acquire staff and technology needed to monitor online pharmacies.

"This industry is in its infancy ... and rogue operators pose a threat to the health of Americans," Clinton said. "Today we are unveiling a proposal that sends a signal that we have zero tolerance for prescription drug Internet sites that ignore federal and state laws and harm patient safety and health."

Clinton proposed federal fines as high as $500,000 for Web sites that sell drugs without getting a valid prescription from online buyers. See White House fact sheet.

Although observers see such measures boosting the credibility of legitimate operators, one leading e-pharmacy said the proposal is too vague and may also cut too wide of a swath.

The measures, for instance, are unclear on how regulators would crack down on offshore pharmacies.

"It does not seem that these additional regulations will stop this current crop of rogue pharmacies or consumers from visiting them," said Drugstore.com CEO Peter Neupert in a statement. "Any proposed legislation must be narrowly tailored so as to avoid creating problems for the legitimate online pharmacies."

Neupert also expressed concern about the measure's proposal to give the FDA power to subpoena the records of online pharmacies "and potentially our customers' proprietary personal information."

The move would marks a major shift in regulatory oversight of retail pharmacies, which are usually regulated by individual states. The FDA currently has no jurisdiction over drug stores.

Online prescriptions mark only the first major issue to be faced by the health care industry as it moves increasingly online, said Keith Korenchuk, a Charlotte, N.C.-based attorney who specializes in health care issues.

The measures are certain to open debate between various constituencies from federal regulators to state officials to pharmaceutical retailers, as well as operators of health-related Internet sites, free-speech advocates and others.

"I think where the debate is headed is how much individual freedom will people have on the Net to enter the space that's previously been reserved for health care professionals," Korenchuk said.

Critics of the proposal fear that the measure poses a significant danger to the growing ability of patients to find health care information online.

Edward L. Hudgins, director of regulatory studies at the libertarian-oriented Cato Institute, said he fears the proposed measures represent a regulatory "foot in the door" that could lead to further measures aimed at restricting consumer access to online health care information and services.

"They say this is to control illegal sales that get around prescription requirements, but we're going to see more attempts out of the Food and Drug Administration" in the future to regulate cyberspace, Hudgins said. "It's a true danger to freedom."

The Internet, and its ability to make highly specialized information easily available to the general public, has already caused headaches for some regulators. A federal judge earlier this year struck down a Commodity Futures Trading Commission rule that prevented some Web site operators from providing futures trading advice.

But Korenchuk contends that regulators must begin to examine a regulatory framework for online health care and that Internet pharmacies are a logical place to start.

That's because other health care operations will move increasingly online in coming years, he said, bringing increased interactivity and the ability to have more direct health care delivered on the Internet.

"This is a huge market with huge societal impact," Korenchuk said. "This is not just about getting Viagra on the Net."

The White House and regulators have praised scrupulous online drug stores, which like most mail-order pharmacies, require a patient's physician to phone, fax or mail a prescription before dispensing the medication. The businesses are seen as a boon to homebound patients and people living in remote areas.

But regulators contend the rapid growth of cyberspace-based drug providers has outstripped the ability of regulators to keep pace. Also, state watchdogs are sometimes hampered by geography if the pharmacy is located beyond state lines.

Meanwhile, states have moved recently against some Web-based operators. Illinois filed suit against four businesses in October and Michigan this month ordered 10 online pharmacies to halt sales or face legal action.

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